CBE Business Statistics and Data Analysis Flashcards

Heteroskedasticity in a regression model refers to:

Answer: Non-constant variance of the error terms across observations

Heteroskedasticity occurs when the variance of regression residuals is not constant across all levels of the independent variables, violating a key OLS assumption.

The Gini coefficient is used in business economics primarily to measure:

Answer: The degree of income or wealth inequality in a distribution

The Gini coefficient ranges from 0 (perfect equality) to 1 (perfect inequality) and is the standard measure of income or wealth distribution inequality.

In econometrics, instrumental variable (IV) estimation is used to address:

Answer: Endogeneity bias when regressors are correlated with the error term

IV estimation uses an instrument—a variable correlated with the endogenous regressor but not with the error term—to obtain consistent coefficient estimates.

A business economist uses index numbers primarily to:

Answer: Compare values across time or groups relative to a base period

Index numbers express values as a percentage relative to a base period (typically 100), enabling comparisons of prices, outputs, or other variables over time.

Which statistical test is most appropriate for comparing whether the means of two independent groups are significantly different?

Answer: Two-sample t-test

The two-sample (independent samples) t-test evaluates whether the population means of two separate groups differ, assuming approximate normality.

In the context of business forecasting, the mean absolute percentage error (MAPE) is used to:

Answer: Measure forecast accuracy as a percentage of actual values

MAPE expresses forecast errors as a percentage of actual values, providing an intuitive, scale-independent measure of model accuracy.